Some people think dealing with bills is not fun. They consider it a burden which they would love to lift from their shoulders or at least reduce. Billers do not like having to create and send them and bill payers do not like paying them. But billing consumers for goods and services has always been a necessary exercise and transaction cost of engaging in credit-based commerce. Traditional paper-based billing processes seek three major objectives: to (1) deliver bills to the customer base reliably (2) at minimum cost and (3) in a manner that causes quick payment. Although as reliable as the postal system, conventional paper-based billing is expensive and gives the customer a significant float thus depriving the biller of the time value of money. For example, a company with 100,000 accounts which are billed on a monthly basis may spend over two million dollars a year in paper-based billing expenses; a single paper based billing, transaction can cost between one and two dollars. Much of this expense stems from the cost of materials, printing, postage, and manual processing of the paper bills, inserts and envelopes.
The time delay associated with paper based billing can be particularly vexsome to small billers and non-recurrent billers who tend to rely more heavily on cash flow. For larger billers such as a utility whose average billed amount is $75 with a customer population of 100,000, the float assuming a 6 day round trip through the postal system and interest at the rate of 8% is more than $115,000 per year.
Paper-based billing can also deprive billers of an opportunity to build brand. Although many paper billers include various types of marketing inserts with their bills in an attempt to use the billing activity as an additional opportunity to build brand and customer relationships, those materials cannot be targeted as effectively as in an interactive session. For instance, billers do not have significant realistic control over the circumstances under which, or whether, a consumer views particular inserts. In fact, studies have shown that many consumers disregard such inserts altogether.
Electronic bill presentment and payment (EBPP) arose with the advent of the Internet because it addresses three needs of billers. First, it reduces billing cost. Second, it allows more effective marketing through the billing process than paper-based billing. Third, it allows better customer relationship management than with paper-based billing. Instead of preparing and mailing paper bills, EBPP enables businesses to publish, distribute and/or present bills electronically on web pages. Instead of writing checks and applying stamps, consumers have the opportunity to pay bills such as by an electronic credit card charge or direct bank draft. The biller benefits by avoiding the cost of generating and mailing paper bills, and by avoiding the payment float occasioned by two-way mail delay and other delays in paper-based remittance. The customer benefits with the added convenience of conducting transactions online, and the opportunity to pay many or all bills on one site or in one virtual space. The biller has the opportunity to present customized content on the screenface with the bill, without having to foot the extra printing and insertion cost associated with paper inserts. The biller can stay in closer communication with the customer via electronic mail and other electronic techniques, and can communicate interactively.
Nothing is free, however, and there are costs associated with moving from paper-based billing to EBPP. EBPP in any event presents significant hardware, software, security and storage issues, as well as significant human resources issues. Outsourcing these issues is a viable alternative for an organization that does not desire to custom build a proprietary EBPP function or whose size or economic base does not cost justify such an in-house solution, but outsourcing always sacrifices control of the system, of where and how the bills are presented, and over the potential to build brand and customer relationships through the billing process. In short, across the population of various types of conventional EBPP architectures and systems, there is always a tradeoff between complexity and control over the process. In-house systems tend to be complex and expensive, but give maximum real time control over the process. Outsourcing solutions can be less expensive to pursue, but conventionally only by giving up significant real time control.
Real time control over the billing process is of massive importance, because it allows building of brand and customer relationships. For example, special discounts can be applied online in real time if the customer pays in a certain period, and the account immediately adjusted and balanced. Specially targeted inserts can be presented on screen with the bill according to a particular group in which the customer fits, where he or she is geographically located, or according to any other desired demographic data or category. Time sensitive content can be displayed with the bill, such as promotions relating to events which occur on certain days, limited time only sales or marketing efforts, or any other time sensitive information which obviously needs to be added, deleted or supplanted when the relevant time starts or expires.
In one common approach to EBPP, for example, which is often referred to as the custom development method, billers create a proprietary electronic billing system and link it to a third-party for payment processing. Because custom development is mostly an internal EBPP solution, it gives billers the advantage of tight control over the billing system. However, this type of solution is expensive. Not only is it a technology risk because billers lose the flexibility to adapt to other EBPP standards, but it also requires a substantial commitment of manpower, infrastructure and consultant resources for planning, development and implementation. Among other things, merely obtaining a license to run the relational database application for managing billing information is often viewed as prohibitive, especially for smaller billers. Furthermore, such systems innately discourage consumer use or popularity, since the consumer is required to log onto and initiate a session on a separate site, with different passwords and different logon procedures, for each different bill the consumer wishes to pay.
One example of the custom development or “in-house” approach to EBPP is the direct rendering approach. In the direct rendering approach, billers merely present electronic representations of the paper bills to consumers. For example, the paper bills may be electronically “redrawn” via electronic scanning and then digitally presented to consumers in any standard electronic format such as an HTML web page or a PDF file. However, because the information contained in the paper bills is not extracted from the document, billers are unable to perform any useful processing of the electronic bill or apply any marketing or business rules other than merely electronically presenting the bill and accepting payment. For instance, the biller is not able to query a database and obtain a report of all bills with a balance over $40.00. Since images are stored rather than data, for the bills to be formatted differently for another type of platform such as for a personal digital assistant or cellphone rather than for a personal computer, they must be electronically rerendered. Bills cannot be grouped according to demographic or other target marketed parameters for customized advertising, promotional or brand building content or graphics. Customer service based on accessing a database of the information in response to customer inquires is precluded. Reports cannot be prepared for the biller to show aging or other information about status of bills. The direct rendering is perhaps the most static of EBPP systems.
A second approach to EBPP is the front-end rendering approach. In front-end rendering, parsing rules are applied to a billing stream at the time the billing stream is loaded. The rules transform the data into a generic format for processing and storage, such as using XML, but only in a snapshot fashion at parsing time and without the ability to change bills or otherwise operate on the data stored in the database. Thus, although the front-end rendering approach does enable billers to perform certain load time decisions and rules, it tends to create a static rather than dynamic set of data with concomitant limitations. It tends to focus on parsing and presentment of bills, with less emphasis on the processing aspect. It tends to be fast, even if not dynamic. Because this EBPP paradigm merely shoots a snapshot at processing time, billers cannot make modifications to the electronic bill at the time of presentment, for example. It cannot create and use various report and view formats via which to view and operate on the billing data stored in the database. It cannot create and set permissions for access to and processing of such data. In addition to loss of control of this sort and other sorts, the front-end rendering approach is expensive due to substantial implementation costs and because it requires the use of multiple application program interfaces to handle the electronic billing data. A central reason for loss of control of data once the biller stream has been parsed is that the biller-side data has not been decoupled sufficiently from the presentment-side data.
A third conventional EBPP approach, which is referred to as the consolidator approach trades control of the billing interface and branding opportunity for a reduction in cost, risk, and internal staffing by outsourcing the EBPP to a third party consolidator. Here, the electronic payment processor takes on a lock box function of holding and moving cash during billing and payment. The payment processor performs an aggregation function by presenting multiple billers' statements at a single, consolidating web site. Not only does interposition of the consolidator and its interface between billers and consumers interrupt any existing relationship and potential to build brand, but it also precludes exploitation of new biller opportunities to interact with consumers.
In addition to the problems already mentioned, existing EBPP systems and processes have various other disadvantages. For example, they remain an expensive option for most billers who lack sufficient economies of scale necessary to overcome the high fixed cost of implementation. These EBPP methods, which primarily focus on reducing biller costs, also often fail to address the issue of consumer convenience adequately, much less to provide effective incentives for consumer adoption.
Furthermore, conventional EBPP approaches often require redundant resources supported by multiple entities and consequently waste processing and transport resources. For example, using existing EBPP methods, if a consumer desires to pay AT&T bills electronically at a website such as Yahoo.com., the following occurs. First, the consumer requests that Yahoo.com receive the AT&T bill and send it to the consumer. Then, assuming AT&T partners with an electronic payment facilitator such as CheckFree, Yahoo.com makes a request to CheckFree. Finally, CheckFree initiates the request to AT&T. Because each of these entities is independent, each requires its own resident database and other support functionality. Such conventional EBPP approaches leave open significant opportunity to increase efficiency and effectiveness by reducing throughput, redundancy and concurrency tasks and issues.